I have a few bucks but horrible credit score. How do I start?

[Jorge G.]

Hey everyone,

I just signed up for bigger pockets and I am interested in getting started in real estate investing. I just finished reading 'How to Invest in Real Estate' and frankly, the book left me with more questions. Im a 33 year old man, and I have over 150k in equity in my current home, 50k from my business, 20k in crypto and 50k in my 401k. My business cash flows around 15-25 k a month depending on the month, I work from home as a w2 and make 50k a year from that. 

However, my credit score is at a measly 586 last time i checked which was 2 weeks ago. When studying the strategies, i think the ones that caught my eye were BRRRR, Short Term Rentals, and House flipping. I dont know what book to read next so I can have a step by step guide on getting started or frankly, what steps I can take from here on to get started on this journey.

I am in the boise area and was wondering if you guys could advise me. I am excited to hear from you. Any added information I can provide, Ill be more than happy to. 

[Theresa Harris]

The big question is why is your credit rating low?  You don't say if you have any debt, but have you not paid bills in the past?  Something had to happen to affect your credit rating. 

[Alexandra St Martin]

Download the Credit Karma app and do whatever it takes to get your credit score up! In the meantime, keep saving.

[Celine Crestin]

Great job on saving up and your business endeavors! I think it's really important you reach out to a trusted lender partner that services your area and create a plan. Even if you BRRRR, you'll need to refi and that will require an improved credit score. My lenders here will guide my clients and provide them a step by step action plan to improve their scores. I feel certain a lender in your area can do the same. Good luck!

[Eliott Elias]

Pay for a property cash

Or partner on a deal with someone who has good credit 

[Jorge G.]

Quote from @Theresa Harris:

The big question is why is your credit rating low?  You don't say if you have any debt, but have you not paid bills in the past?  Something had to happen to affect your credit rating. 

 Yup. bad decisions in my late 20s.Luckily I am now recovering but I imagine my credit will take another 12 months to recover. Debt is at 20k between credit cards loans, etc, not including mortgage. 

[Theresa Harris]

Quote from @Jorge G.:

Quote from @Theresa Harris:

The big question is why is your credit rating low?  You don't say if you have any debt, but have you not paid bills in the past?  Something had to happen to affect your credit rating. 

 Yup. bad decisions in my late 20s.Luckily I am now recovering but I imagine my credit will take another 12 months to recover. Debt is at 20k between credit cards loans, etc, not including mortgage. 

 That's good news.  Take the next year to pay off the credit card debt (especially any with high interest rates) and keep saving for a down payment.  Your debt will also affect how much you can borrow.

[Erik Estrada]

Quote from @Jorge G.:

Hey everyone,

I just signed up for bigger pockets and I am interested in getting started in real estate investing. I just finished reading 'How to Invest in Real Estate' and frankly, the book left me with more questions. Im a 33 year old man, and I have over 150k in equity in my current home, 50k from my business, 20k in crypto and 50k in my 401k. My business cash flows around 15-25 k a month depending on the month, I work from home as a w2 and make 50k a year from that. 

However, my credit score is at a measly 586 last time i checked which was 2 weeks ago. When studying the strategies, i think the ones that caught my eye were BRRRR, Short Term Rentals, and House flipping. I dont know what book to read next so I can have a step by step guide on getting started or frankly, what steps I can take from here on to get started on this journey.

I am in the boise area and was wondering if you guys could advise me. I am excited to hear from you. Any added information I can provide, Ill be more than happy to. 

Some hard money lenders wouldn't have a problem lending you money with the low credit score. Also if you plan to house hack, obtaining an FHA loan wouldn't be tough either.

[Ariel K.]

@Jorge Gonzalez maybe I’m missing something - if your business cash flows $15-$25 k/mth, why don’t you just pay off your debt in one month? With that kind of cash, you should easily be able to pay someone to repair your credit. I agree with others that hard money may be the way to go.

[Jorge Gonzalez]

Quote from @Ariel K.:

@Jorge Gonzalez maybe I’m missing something - if your business cash flows $15-$25 k/mth, why don’t you just pay off your debt in one month? With that kind of cash, you should easily be able to pay someone to repair your credit. I agree with others that hard money may be the way to go.

 My business is taxed as an scorp so for tax purposes I’m trying to leave the profit in my business and get taxed at a lower percentage than if I moved it and reported it as w2 income :/

[Nathan Gesner]

You've got to do the work to improve your credit score. You should be able to make major improvements to it within one year. At the same time, save up and watch for deals.

[Marcus Auerbach]

You are probably not ready to invest. Your credit score is a reflection of your personal financial habits. If you increase your finances through real estate without changing your personal behavior you will only amplify your problems.

Work on yourself first, there are plenty of books and online resources. Being an investor is first of all a state of mind, that's your foundation and you need it to be solid!

[Nick Coons]

@Jorge Gonzalez

Since you're taxed as an S-Corp, take some of the profit as distributions (instead of W-2 income) and use it to further pay down debt. You'll be taxed exactly the same as if you just left the money in the business.

But putting that aside for the moment, let's say that your only option is taking funds as W-2 income. Is the extra amount you'd pay in taxes not worth it to you to get started in real estate? In other words, would you anticipate making so little in real estate that it's not worth a few thousand in income taxes?

[Account Closed]

Quote from @Jorge G.:

Quote from @Theresa Harris:

The big question is why is your credit rating low?  You don't say if you have any debt, but have you not paid bills in the past?  Something had to happen to affect your credit rating. 

 Yup. bad decisions in my late 20s.Luckily I am now recovering but I imagine my credit will take another 12 months to recover. Debt is at 20k between credit cards loans, etc, not including mortgage. 

Work on clearing those debts as soon as possible. It will take time but it is certainly possible to fix your credit.

[John Clark]

Quote from @Jorge Gonzalez:

My business is taxed as an scorp so for tax purposes I’m trying to leave the profit in my business and get taxed at a lower percentage than if I moved it and reported it as w2 income :/

Too many people get the vapors when it comes to the word "taxes." Right now you are paying taxes on the money you are keeping parked in your  S corporation in three ways. First, the taxes you eventually pay each year on what you do move out of the S corporation. Second, the interest you are paying on your personal debts because you are keeping money in the S corporation (it's gone in either event, so therefore treat it as a tax). Third, it is costing you money in terms of your ability to get low interest financing (the higher interest rates are a "tax") and in terms of limiting the amounts you can borrow.

Do the math. The cost of liberating yourself from debt and the benefits of being able to get better interest rates on more money is probably lower than you think.

You can replace/earn back money. You will never get back time.

[Stefan St. Marie]

Looking at the available resources you listed it seems like you only have the $20k in crypto as something you could sell to put into real estate. 

The equity in your home isn't accessible unless you refinance (but you have low credit so thats expensive). 
You could look at getting a HELOC (second mortgage) and might be able to access $50k of that equity. Check out Idaho Central Credit Union.

So now with your $70k (from HELOC and selling Crypto) you have enough for a $280k house (75% LTV).

Not quite enough to have good options around town. So personally I would look at moving and turning your existing house into a rental. Even start now by getting roommates. 
But then again, buying a new personal residence with poor credit will be very expensive. 

Which comes back to everyone else's comments about working to move that credit score up.

Hope this helps! 

[Don Spafford]

Sounds like you have a lot of resources that you can utilize, as others have mentioned. You should also be able to take a loan from your 401k, usually up to 50% at that amount. I took a loan from my 401k to help with my first rental property purchase. There are some lenders that can work with lower credit scores. You will probably have to show business income for the last two years to use your business income for loan approval. As stated, there are many options. You could even provide some private loans to build it up more. Partner with others, use their credit and your capital. You could even consider investing in a syndication to put your money to work while you build your credit.

[Richard Loniewski]

Look for a Joint Venture partner that can come on board for his credit, give them an equity share. In todays market investment lending relies heavily on credit score so start building back your credit as well, but for the short term find a credit partner.

[Jorge Gonzalez]

Quote from @Stefan St. Marie:

Looking at the available resources you listed it seems like you only have the $20k in crypto as something you could sell to put into real estate. 

The equity in your home isn't accessible unless you refinance (but you have low credit so thats expensive). 
You could look at getting a HELOC (second mortgage) and might be able to access $50k of that equity. Check out Idaho Central Credit Union.

So now with your $70k (from HELOC and selling Crypto) you have enough for a $280k house (75% LTV).

Not quite enough to have good options around town. So personally I would look at moving and turning your existing house into a rental. Even start now by getting roommates. 
But then again, buying a new personal residence with poor credit will be very expensive. 

Which comes back to everyone else's comments about working to move that credit score up.

Hope this helps! 

 When you say moving , are you saying renting out my current house and moving to another home here in Boise ?

[Jorge Gonzalez]

Quote from @Stefan St. Marie:

Looking at the available resources you listed it seems like you only have the $20k in crypto as something you could sell to put into real estate. 

The equity in your home isn't accessible unless you refinance (but you have low credit so thats expensive). 
You could look at getting a HELOC (second mortgage) and might be able to access $50k of that equity. Check out Idaho Central Credit Union.

So now with your $70k (from HELOC and selling Crypto) you have enough for a $280k house (75% LTV).

Not quite enough to have good options around town. So personally I would look at moving and turning your existing house into a rental. Even start now by getting roommates. 
But then again, buying a new personal residence with poor credit will be very expensive. 

Which comes back to everyone else's comments about working to move that credit score up.

Hope this helps! 

 When you say moving , are you saying renting out my current house and moving to another home here in Boise ?

[Stefan St. Marie]

Quote from @Jorge Gonzalez:

Quote from @Stefan St. Marie:

Looking at the available resources you listed it seems like you only have the $20k in crypto as something you could sell to put into real estate. 

The equity in your home isn't accessible unless you refinance (but you have low credit so thats expensive). 
You could look at getting a HELOC (second mortgage) and might be able to access $50k of that equity. Check out Idaho Central Credit Union.

So now with your $70k (from HELOC and selling Crypto) you have enough for a $280k house (75% LTV).

Not quite enough to have good options around town. So personally I would look at moving and turning your existing house into a rental. Even start now by getting roommates. 
But then again, buying a new personal residence with poor credit will be very expensive. 

Which comes back to everyone else's comments about working to move that credit score up.

Hope this helps! 

 When you say moving , are you saying renting out my current house and moving to another home here in Boise ?

Yes exactly. You need 20% to 25% down on an investment home (buying a new rental). 
But a new primary residence you only need 3%-5% down.

[Jorge Gonzalez]

Quote from @Stefan St. Marie:

Quote from @Jorge Gonzalez:

Quote from @Stefan St. Marie:

Looking at the available resources you listed it seems like you only have the $20k in crypto as something you could sell to put into real estate. 

The equity in your home isn't accessible unless you refinance (but you have low credit so thats expensive). 
You could look at getting a HELOC (second mortgage) and might be able to access $50k of that equity. Check out Idaho Central Credit Union.

So now with your $70k (from HELOC and selling Crypto) you have enough for a $280k house (75% LTV).

Not quite enough to have good options around town. So personally I would look at moving and turning your existing house into a rental. Even start now by getting roommates. 
But then again, buying a new personal residence with poor credit will be very expensive. 

Which comes back to everyone else's comments about working to move that credit score up.

Hope this helps! 

 When you say moving , are you saying renting out my current house and moving to another home here in Boise ?

Yes exactly. You need 20% to 25% down on an investment home (buying a new rental). 
But a new primary residence you only need 3%-5% down.

So if I move to a second home but make it my primary residence , I only have to put 3-5 percent down ?

[Stefan St. Marie]

Quote from @Jorge Gonzalez:

Quote from @Stefan St. Marie:

Quote from @Jorge Gonzalez:

Quote from @Stefan St. Marie:

Looking at the available resources you listed it seems like you only have the $20k in crypto as something you could sell to put into real estate. 

The equity in your home isn't accessible unless you refinance (but you have low credit so thats expensive). 
You could look at getting a HELOC (second mortgage) and might be able to access $50k of that equity. Check out Idaho Central Credit Union.

So now with your $70k (from HELOC and selling Crypto) you have enough for a $280k house (75% LTV).

Not quite enough to have good options around town. So personally I would look at moving and turning your existing house into a rental. Even start now by getting roommates. 
But then again, buying a new personal residence with poor credit will be very expensive. 

Which comes back to everyone else's comments about working to move that credit score up.

Hope this helps! 

 When you say moving , are you saying renting out my current house and moving to another home here in Boise ?

Yes exactly. You need 20% to 25% down on an investment home (buying a new rental). 
But a new primary residence you only need 3%-5% down.

So if I move to a second home but make it my primary residence , I only have to put 3-5 percent down ?

Short answer yes. 
Long answer... talk to lenders. Talk to them all the time. 
And if you don't like what they say, don't get discouraged.. talk to a different lender. 

This is the biggest separator of new investors to veteran investors. Going from the unknown of what is possible to learning how to unlock financial tools that are available. 

[Steven Goldman]

Quote from @Jorge G.:

Hey everyone,

I just signed up for bigger pockets and I am interested in getting started in real estate investing. I just finished reading 'How to Invest in Real Estate' and frankly, the book left me with more questions. Im a 33 year old man, and I have over 150k in equity in my current home, 50k from my business, 20k in crypto and 50k in my 401k. My business cash flows around 15-25 k a month depending on the month, I work from home as a w2 and make 50k a year from that. 

However, my credit score is at a measly 586 last time i checked which was 2 weeks ago. When studying the strategies, i think the ones that caught my eye were BRRRR, Short Term Rentals, and House flipping. I dont know what book to read next so I can have a step by step guide on getting started or frankly, what steps I can take from here on to get started on this journey.

I am in the boise area and was wondering if you guys could advise me. I am excited to hear from you. Any added information I can provide, Ill be more than happy to. 

Jorge you need to go in two directions. First, start working on repairing your credit wit ha credit repair professional. Second, you can take on a credit partner who can own a portion of your LLC and be the guarantor on the deal while you provide the capital. In order to accomplish that you will need to learn the ins and outs of rehabbing and real estate so that your partner is comfortable with investing in your projects. Good luck and keep moving forward. Poor credit should not stop you!

[Jorge Gonzalez]

Quote from @Steven Goldman:

Quote from @Jorge G.:

Hey everyone,

I just signed up for bigger pockets and I am interested in getting started in real estate investing. I just finished reading 'How to Invest in Real Estate' and frankly, the book left me with more questions. Im a 33 year old man, and I have over 150k in equity in my current home, 50k from my business, 20k in crypto and 50k in my 401k. My business cash flows around 15-25 k a month depending on the month, I work from home as a w2 and make 50k a year from that. 

However, my credit score is at a measly 586 last time i checked which was 2 weeks ago. When studying the strategies, i think the ones that caught my eye were BRRRR, Short Term Rentals, and House flipping. I dont know what book to read next so I can have a step by step guide on getting started or frankly, what steps I can take from here on to get started on this journey.

I am in the boise area and was wondering if you guys could advise me. I am excited to hear from you. Any added information I can provide, Ill be more than happy to. 

Jorge you need to go in two directions. First, start working on repairing your credit wit ha credit repair professional. Second, you can take on a credit partner who can own a portion of your LLC and be the guarantor on the deal while you provide the capital. In order to accomplish that you will need to learn the ins and outs of rehabbing and real estate so that your partner is comfortable with investing in your projects. Good luck and keep moving forward. Poor credit should not stop you!

Thank you. The good thing is that since this post my credit is now up to 669. Should I wait until it hits the 700s?

[Sam Yin]

@Jorge Gonzalez

If you are really serious about REI, just do it. Dont wait for your credit score and all that jazz. Many people will give you answers based on their experiences, just as I am about to do. Some people will qualify their answers with their profession on lending, banking, buying and credit stuff.

So here is my qualifications: I made purchases while getting foreclosed. I made purchases immediately after foreclosure with WITH wife's BK filing. I refis after foreclosure. More investment purchases, etc... credit was down to 580s then (2015), and over 10 transactions later, now 800+. I did it SOLO. looking back, I could have made it easier on myself if I found a partner.

Can it be done, YES. Is it easy, NO. is it possible based on what you have told us so far and with your savings, YES. You just need DL keep shopping for the right lender that is willing to work with you. Be honest and have a realistic plan to present. Shop banks, CUs, Brokers, Private Money, etc...

First, have the courage and dont fear rejection. What's the worse... you end up where you started. That's how I approached it when I crawled back up.